Bankia awaits share val­u­a­tion

As Spain’s na­tion­alised Bankia awaits an im­mi­nent an­nounce­ment on the val­u­a­tion of its shares, the last step in the clean-up of the bank, the government is press­ing ahead with a new par­tial merger which could slow its re­cov­ery.

The tens of thou­sands of Spa­niards who bought shares in the sav­ings bank in 2011 will soon find out that each share they hold is worth just 0.01 euro, a val­u­a­tion in­sisted upon by EU reg­u­la­tors as Bankia pre­pares to get €18 bil­lion (Dh86.4 bil­lion, $23.3 bil­lion) of Euro­pean res­cue funds.

While the bank is show­ing ten­ta­tive signs of re­cov­ery, of­fi­cial and bank­ing sources said the government will hire an in­ter­na­tional con­sul­tant to come up with a plan to par­tially merge Bankia with Catalun­yaBanc and NCG Banco, two other rescued lenders, which it wants to op­er­ate un­der a sin­gle hold­ing com­pany.

The plan emerged un­ex­pect­edly ear­lier this month af­ter the Bank of Spain failed to auc­tion off Catalun­yaBanc. The can­celled sale was a sign of pos­si­ble cracks emerg­ing in the coun­try’s on­go­ing fi­nan­cial re­form. Bankia’s ex­ecu- tives have not yet been briefed on the plan.

“It is an un­ex­pected dis­trac­tion. Things were start­ing to fall in line well,” said a bank­ing source with knowl­edge of Bankia’s think­ing.

Af­ter re­quest­ing a bailout last year and meet­ing strict con­di­tions such as im­pos­ing steep losses on small savers who in­vested into the bank, the an­nounce­ment of the val­u­a­tion on Fri­day was meant to mark a fresh start for the lender.

Bankia in Fe­bru­ary re­ported ten­ta­tive signs of re­cov­ery and said it would re­turn to profit this year af­ter de­posits rose at the end of 2012 and it be­gan cut­ting costs.

The other two banks, how­ever, are ex­pected to report losses in 2013 and 2014. Also, the government could end up hav­ing to rene­go­ti­ate with the EU some terms of the res­cue of the banks, if their op­er­a­tions are joined.

The government in­sists it will not fully merge the three banks and that the lenders will join forces on mar­ket­ing, ne­go­ti­at­ing terms on ma­jor pur­chases and other items. It also says that cre­at­ing a sin­gle hold­ing op­er­ated by Bankia’s top ex­ec­u­tives will not weigh on the lender’s ca­pac­ity.